tv Nightly Business Report PBS August 31, 2015 6:30pm-7:01pm PDT
. this is "nightly business report" with tyler mathisen and sue herera. closing the books. stocks end august with their worst month in more than three years. so what does it mean for september? another gusher. oil spikes again posting its biggest gain in years. and why one texas city has become a launching pad for new business. all of that and more for monday, august 31st. good evening, everybody. i'm sue herera. tyler is off tonight. oil prices spike again pulling together the biggest day since 1990. more on that in just a moment. first, despite that turnaround in oil, stocks wrapped up a very bad month of august. you know the story. fears over china's growth and uncertainty about the timing of an interest rate hike by the
federal reserve. and that led to one of the worst months in years on wall street. today, the dow jones industrial average fell about 115 points to close at 16,528. the nasdaq shed 51 and s&p 500 lost 16 points. but for the month, the dow was down about 6.5%. its worst month in more than five years. nasdaq fell nearly 7% and s&p 500 shed more than 6. for the nasdaq and s&p, it was the biggest monthly percentage drop since may of 2012. so august ends with steep losses and heavy volatility and we head into what historically is one of the worst months for stocks. so dominic chu looks at whether or not history might repeat itself. >> reporter: for many, august has turned out to be a month you'll soon try and forget. investors and traders look at some of the worst monthly losses in years and stock volatility
soared to new heights amidst of a backdrop of september and beyond. >> i'm hopeful that perhaps we've seen some of the worst of the volatility because i feel like we cleansed our palette, so to speak. again, why you should expect volatility, the reasons are still out there. the fed still hasn't moved yet. china certainly is probably going to continue to struggle for some time, perhaps a lot of the other emerging markets as well. >> reporter: market history may be on the side of the bears as well. according to s&p sam stovall, september has been one of the worst stock market returns compared to any other month. the s&p 500 has fallen by an average of .6 of 1% since that time period. that factors into the more pessimistic case for stocks but it doesn't mean that everyone is
running scared. >> we've seen fundamental earnings growth here. hopefully we'll get good news out of the third-quarter releases in october and that could provide a nice tail wind for markets. couple that with the fact that the recent correction has pushed valuations down to a much more reasonable level. we think it sets the stage for what could be a pretty good market coming in to the end of the year. >> reporter: the bottom line here is that investors should brace for what could be more ups and downs in the stock market, especially with a lot of variables, both known and unknown in the coming months. for "nightly business report," i'm dominic chu. one of the things going on in this crazy august market, the stunning comeback of oil prices. today, domestic crude ending up early 9% at 49.20 a barrel. and put oil up 27% since thursday, the biggest three-day percentage gain in 15 years. jackie deangelis looks what is behind the huge move.
>> reporter: crude oil prices ending today at $4. wti finishing at $49.20 and nearly 26% gain in just three days. traders weren't necessarily expecting this today. as a matter of fact, the session opened lower as the markets were pausing to digest some of the news we've heard as of late but then some headlines that major producers and opec players were willing to sit down at the table and talk about stabilizing the global marketplace sent prices higher. in addition, the eia came out with production data for the month showing in june the u.s. produced $9.3 million of barrels a day, down two months in a row row from april. then, a fire at a canadian project because of an issue there creating a production holt which could eventually lead to u.s. inventories coming down. so the perfect storm of elements to take prices higher from here. but buyer beware, a lot of this was short covering and traders still believe the lows we tested at $37.75 aren't out of the
question because right now people are moving the price higher on top of talking, actual negotiations haven't happened just yet. i'm jackie deangelis for "nightly business report." >> steve wood is chief market strategist at russell investments. i guess i should take a deep breath that august is over but i'm looking into september which traditionally has an awful lot of volatility in it. you say this is a return to more normal volatility? >> it's been a six-plus year raging bull market in u.s. equities, certainly, and it's beginning to get traction in europe as well. china had a year, until very recently, up well over 100%. in a low-voluatile environment. >> does it worry you, though, that we saw that 1,000-point gap down? it seems as though, yes, we're used to volatility but the
extremes seem to be more extreme than what we've seen in the past. >> but it's very, very punk indicated. that pattern is somewhat new. that's why investors need to be globally diversified and it's not just stocks or bonds, it's a combination. they need to look lovely. i think volatility and a return to volatility is something we should expect. there's no reason that tomorrow should be different than today. >> market doesn't know it it's going to be september tomorrow, right? >> right. the orbit around the sun doesn't affect global asset prices. we're seeing volatility. there's a chinese question mark, a federal reserve question mark. you were talking about oil earlier, question mark. there's a lot of moving pieces and valuations globally for all of these asset classes. i think the market is struggling with that right now. >> let's start first with oil. you know, the kind of spikes that we haven't seen in multiple years, certainly, and that's brought back the inflation scenario, which leads us to the
fed. tie that all up in one neat little bow in terms of how you view it. >> it would be the fed. if i have to boil everything down to the most critical element, i'm going to look at the federal reserve. whatever janet yellen does as the chair of the federal reserve, that's the most important thing. right now inflation is very, very low and the fed would like inflation to be higher. so when they talk about price stability or inflation stability, it can be too low as well as being too high. it's just that most people have experience with it being too high. right now inflation is a little low. i don't think it's going to force the fed to do anything that they don't want to do before they do it. the fed has time. inflation is low. oils at high 40s right now. 148 it was there a couple of years ago. inflation is still on the low side. i think the federal reserve, just as an institution, wants to raise rates by the end of this year. we still think it's going to be september. >> you do? that was going to be the next question. >> that's our expectation, that it will still be september. by the end of the year, the fed as an institution, they have not
been able to have a positive -- >> it's out of their control. >> so they haven't had their number one policy tool for pushing a decade right now. they want to get that back, have a positive rate and then after that they will look at inflation. once they go positive, they become data dependent. you said to look outside just the traditional stock and bond allocations, maybe look overseas. where overseas? >> our overweight at russell and equity space has been europe. we arrived at that conclusion last year. we looked at valuations in the united states. kind of rich. stocks are kind of expensive. in europe they were more attractive. the economy in europe was coming off the bottom. the united states, as we mentioned earlier, is getting closer to raising rates with each month whereas the european central bank is going to start printing a lot of money. they are doing quantitative easing and we still have an over weight to europe. >> steve woods with russell investments, thank you.
as we mentioned, there is a crunch of economic data leading into friday's big jobs report. that data could be a big week for the fed and for stocks. bob pisani takes a look at what the markets will be paying attention to. >> reporter: it's a tough week to focus on economics since the market is still dealing with last week's crazy volatility but economics are really important because, as stanley fischer said, what happens with the data in the next few weeks will determine if the fed will raise rates in september. fortunately, this is chock full of data started with the ism manufacturing index. that's tomorrow. the first read on the economy in august. we'll also get revised productivity numbers on wednesday and the ism nonmanufacturing index on thursday. that's a look at sentiment in the services industry. the most important data point, of course, will be the august jobs report. that's going to be on friday. traders are expecting a gain of 220,000 jobs. that would be the fourth straight monthly gains over
200,000. one key component is wage growth, which has been roughly stagnant, just about 2% a year. the big issue is that if any of this data is sufficient to turn the feds doves into hawks, now there are key players, like the new york feds william dudley, vice chair stan fischer and chair janet yellen who appear to be sitting on the fence. this is going to go right down to the wire on september 15th. the fed would not raise rates without a compelling argument that the u.s. economy is improving. good news on the u.s. economy would mean the u.s. is outperforming the rest of the world and would likely drive more investment into our market, including the stock market. this, at least, is the hope of the bulls. one thing the fed is certainly hoping for is that china remains calm. while the fed does not consider china part of its mandate, global turmoil is something they
would clearly like to avoid. for "nightly business report," i'm bob pisani at the new york stock exchange. amid all of that energy, warren buffett revealed it has taken a nearly 11% stake in the oil refiner phillips 66. the $4.5 billion position rebuil rebuilds buffett's stake in the company. phillips' shares rose more than 2% in today's trading. so here to discuss buffett's big bet and what he sees in the refiner, susie gherib, an nbr contributor, she's covered warren buffett for years now. you're the best buffett watcher i know. >> i don't know about that but leave it to warren buffett to always surprise us. he's bull erb on oil. >> why did he do this particular deal? >> i think it's kind of interesting that he had a
relationship -- it's almost like going back to your old girlfriend. bad timing back then. oil prices were very high and now this might be good timing. the people i talked to, oil experts, actually, said don't look at the refining part. this isn't really an oil play but underneath of it are valuable assets, petra chemicals, natural gas delivery. very steady eddie kind of businesses, the kind of investments warren buffett likes. >> i was going to say, on the surface it doesn't fit into the types of companies that he puts into his portfolio so maybe we have to look a little deeper. >> right. food like heinz, dairy queen -- >> right. ends up on your kitchen table or gets it to your kitchen table. >> but there are similarities, sue. he likes unloved assets. it's also a contrarian play. he always rules against the crowd. people don't like energy, he
likes energy. he knows he doesn't know anything about oil. management is important and from what i hear, the management people running phillips are pretty terrific and doing all of the right moves and very excellent marks. >> he's been making a lot of moves, too. he's been very inquisitive lately. >> yeah. a few weeks ago he bought precision cast parts. $32 million. earlier this year, the kraft foods deal, $10 billion. if you add it up, something like 50 billion clarz. >>. >> it is amazing. >> it is amazing. yesterday was warren buffett's birthday. he celebrated 85. so 85th birthday. i think it's also a message to the buffett watchers, don't count me out. i'm not slowing down. >> and i'm doing just fine, thank you very much, right? we wish him a very happy return. susie, so goo good to see you
again. >> thank you. more talk as china bubbles up about sanctions on cyberhacks against u.s. companies. we'll talk about that, next. last week we told you about a ruling by the labor relations board that could shake up the relationships between companies and their subcontractors. home builders say that could have a major impact on how they do business and not in a good way. diana olick has that story. >> reporter: it's a major change to the government's joint employer status which could now put home builders on the hook for issues involving subcontractors, such as labor
violations and union negotiations. the nlrb declined our request for an interview but the board said previous standards to keep pace with the workplace and circumstances. while the ruling covers all employers from fast food companies to health care to high tech, it's particularly profound for the nation's home builders. they rely heavily on specialty trade contractors, like roofers, electricians, plumbers, framers. they are calling it everything from unnecessary to crippling. >> this ruling really, if it's applied to small businesses and the home building sector, really shows no understanding of 80% of the marketplace. it's just -- it's impossible to comply with and use the same business model and has been working successfully for 200 years. >> reporter: the builders can't fight the ruling unless there's a specific case brought against them. i did speak with the ceo of miami-based lannar, stewart miller, and he thinks his
business is highly differentiated from this case but is alert to the ruling and watching. for "nightly business report," i'm diana olick in washington. the white house is reportedly considering sanctions against chinese companies and individuals behind a series of data breaches against u.s. companies. eamon javers is here to describe how this would happen. how are the chinese to react to these sanctions? >> that's one of the big questions and big unknowns and may be why the white house is proceeding cautiously with this. back earlier this year, the president signed an executive order which laid the legal ground work for enacting sanctions against foreign actors. that is, foreign business people involved in cyberattacks here in the united states. whether or not the united states could actually go forward with this will depend on the people part of china and part of the hacking and reveal what u.s. intelligence knows about their
activities so far. >> you mentioned that the white house is going slowly on this. there must be some challenges for the government here. >> yeah. the big one being that the president of china is scheduled to come to the united states for a state visit in october. so presumably if they are going to do this, they would want to do this relatively soon, early in september or well after that trip. doing that while that visit is ongoing would be seen as a huge snub to the chinese and, of course, that question that you asked about how the chinese are likely to react is a big question here. the united states has been reluctant to push china too hard on this although they did indict five members of the chinese military for hacking-related activities but in general they soft-pedalled this and there could be huge blow back for american companies and corporations if the chinese decide they need to take their own retaliatory action and it becomes a series of tit for tat reaction and action.
>> when the chinese come to washington, i'm assuming on the agenda is market turmoil in china and their move to devalue the currency. the secretary treasury weighed in on that and the president has weighed in on that. that might be a thorny issue as well. >> that's another area where the chinese don't like to take a lot of guidance from the united states. they feel like they know how to operate their economy just fine, thank you very much. of course, the treasury secretary has said that he thinks that devaluing the currency was not enough. what the united states wants to see is a real free flowing response to global exchange rate. the chinese government is not likely to let go that lever of power that they control and weild over their economy. >> it's going to be a fascinating visit. eamon, thank you very much. appreciate it. we begin tonight's market focus with two dow components joining forces to bring more iphones and ipads to business users.
collaboration will allow apple devices to work more efficiently in workplaces that use sysco technology. sysco system fell slightly to 25.88. google announced the android watches are now compatible with apple's operating system. separately, google's life science division is teaming up with the european drugmaker on new ways to monitor and treat diabetes. shares were off nearly 2% to 647.82. bristol-myers squibb announcing that it was guaranteed to buy a privately held company for fine br fine broe sis treatment. shares were off almost 2%. fedex has moved a step closer to a final agreement with pilots. this, after the union's executive counsel voted to approve a tentative labor contract. pilots will vote on that agreement in couple of weeks. shares were off more than 1% to
150.61. the streaming video awards are heating up between some of the biggest players. netflix and hulu as big moneys, including "the hunger games" and transformers leave one and head for another. julia boorstin has a look at the digital content battle. >> reporter: if you want to watch "the hunger games" or "the age of extinction" on netflix, you only have until september. netflix is not renewing its contract with epix. films that have been available on amazon for the past three years. analysts say it's no loss for netflix. >> to write a big check, a couple million dollars for movies that are a year old and not exclusive to netflix doesn't do much for them and i think they are better off allocating
their capital elsewhere. if you look at what they've been doing the last three or four years, that has been the strategy and you can see the results yourself. >> it looks to compete with hbo and lure more subscribers with can't miss content. meanwhile, hulu, which until now has been focused on tchl v shows, is stepping up gears. it's going to round out its catalog starting october 1st. owned by disney fox and nbc universal, hulu is broadening its appeal beyond the 10 million it has now. >> these kind of rights don't come up very often and i think it's not a surprise, given the investment that hulu has made recently. look at the seinfeld deal they did. they are spending more money than they have historically. >> amazon also ramps up its
investment in its own original shows and content rights after the company invested $1.3 billion in time instant video last year. and traditional tv channels, including hbo, are fighting back with their streaming video apps as media companies, digital and traditional, look to capitalize on the new opportunity as faster broad band speeds drive an explosion of digital streaming. for "nightly business report," i'm julia boorstin in los angeles. as you know, starting a business is never easy. when we come back, though, we'll take you to a texas town that averages more than 500 new entrepreneurs a month. that's coming up next.
looking to start a new business? you may want to head deep into the heart of texas where one steady named austin as the top-ranked metro for start-ups. kate rogers tells us why. >> reporter: austin, texas, may be known for live music and barbecue but it's gaining attention for something else. at age 14, isabel rose taylor is one of austin's rising small business stars. this year she was awarded emerging women-owned business of the year by the governor. she graduated high school at 11 and went on to show at new york and austin fashion weeks, even landing her clothes in nordstrom stores. >> it all started with art for me. i've been painting since a very young age and that led me to fashion through way of sewing. i was incorporating fabric into my art and that led me into an
interest in sewing. i fell in love with the world of fashion and haven't stopped since. >> reporter: her debut was in part to tech powerhouse dell and its women entrepreneur network. start-ups are opening at record rates. there were an average of 550 new entrepreneurs every month. technology companies has raised a total of $111 million in capital venture fund sog fing s. in fact, the social network for i.p. pros snatched a big hire in a former twitter executive. >> austin is absolutely achieved critical mass on at least our scale in terms of the number of companies that are hiring people. i think producing good business leaders, we've always had good tech talent here. i think we're now developing new business tech leaders as well.
so i think there's critical mass not only for the companies that are here now but also those that have come that hopefully and maybe some of us are producing sort of the austin style of managing tech companies. >> reporter: and for new we are startups, there's a capital factory. an incubator accelerator and fund all rolled into one. they are up to 400 start-ups in residents hoping to become the next big thing. >> there's a lot of overlap in what has historically been the live capital music of the world and so i think by nature we have a culture very innovative as a city. we have university that has a lot of great talent. we've been blessed with extraordinary successes that have created an ecosystem where there are angel systems willing to invest at an early stage and i think austin has sold itself over the years. where else can you meet for tacos? >> i'm indicakate rogers for "n
business report." finally tonight, when is winning the lottery not winning the lottery? a chicago couple was thrilled when they won $250,000 from the illinois lottery last month. instead of a chuck, they got an iou because since lawmakers haven't passed a budget, disbursements of wins of more than $25,000 have been halted. so for now, the big winners are a bit out of luck. that's it for "nightly business report." i'm sue herera. have a great evening. we'll see you tomorrow.
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